Can popularity destroy a sound approach?

Discussion in 'Technical Analysis' started by Jaken, Sep 8, 2007.

  1. Jaken


    Until now i always was the conception that popularity was not destroying an approach. How should it? If i have a buy signal based on a pattern, isn't it even better if everybody knows that this is a good point to buy? But to accomplish somthing in this business you have to be flexibly and choose reality over preconceptions. So, do i misunderstand something very fundamental? Or are there even totally different reasons why popularity could mar a system?
    I'm looking forward to your comments.
  2. The more popular the approach, the more competition you will face when trying to get your share. That means you will need to be earlier to get in, or risk missing the move (or get in late which will probably make you wish you missed the move).
  3. Jaken


    If so why do simple chart patterns like double/triple tops, h&s, triangels work? They are all easy to spot and are a fundamental part of the technical approach.
  4. They only work if your method, discipline and money management are optimal.

    Most traders don't know know how to ride these reversal patterns properly.

  5. I wonder if anyone is willing to purchase stock that you currently own at a price that shows you a big profit, now that everyone knows that this is a good point to buy and also owns the stock.
  6. I've read some stuff that says that the more people that use a method, the more effective it becomes.

    I dunno.
  7. Mup


    All the sheep Quants who followed the Renaissance model would say the methods became "less attractive" in July....:D :D